SuperGroup shares jump 4% as first quarter sales soar 66%

SuperGroup has soared nearly 4% after a positive trading update and comments from directors they did not plan any early share sales.

The fashion retailer behind the Superdry brand beloved of David Beckham and Zac Efron said total sales rose 66% to £54m in the 13 weeks to the end of July. Within that retail sales jumped 66% but wholesale revenues nearly doubled to £21m. The company's shares have come under pressure recently on worries about its growth prospects but chief executive Julian Dunkerton said:

We see continued growth across our business - in the UK, overseas and via our internet platform. We remain excited about the group's future prospects. We are nevertheless operating in a difficult retail market which reflects the macro economic environment.

He also told Reuters the directors had all indicated they would not be selling shares when a lock-up period linked to its March 2010 flotation expires on September 24. In the market SuperGroup has climbed 39p to £10.29, but analysts still have mixed views on the business. A notable fan, Nick Bubb at Arden, said:

Given the grim consumer outlook, we had all our fingers crossed for what super SuperGroup would have to say today with their first quarter sales update and…it looks fine (phew). At the time of the finals SuperGroup released the sales figures for the first 10 weeks of the new-year (up 48% in retail and up 75% in wholesale), so the full 13 week period to the end of July doesn't really tell us much.

They are very bullish about their autumn range (particularly the knitwear, jackets and accessories) and the weather has been suitably autumnal in the UK, even if the ambitions of the group increasingly lie overseas. Consensus for this year is about £67m pretax profit and we are happy with our £70m forecast at this stage, given current momentum and the outerwear bias of the business, although the comparisons are tough at Christmas and the High Street environment is difficult. The share price has actually recovered some of its poise recently and at just under the £10 level the PE is little more than 10 times next year, if profit forecasts are on track and that is theoretically very cheap for a 40% growth stock, even in this market, although we have our 1600p target under review.

At Peel Hunt, John Stevenson said:

2012 is a watershed year. Trading on a 2013 estimate PE of 11 times, the market continues to question the longevity of the brand and discount the likelihood of success, leaving SuperGroup shares offering significant upside if management continues to deliver on its stated growth plans. SuperGroup is one of the few genuine structural growth stocks in our universe; we reiterate our buy stance.

Charles Stanley was also positive:

[The update] reassures that the recent retail sales growth re-acceleration has been maintained and indeed accelerated further. This is consistent with the very recent explicit references to Superdry two weeks ago from two key UK retail landlords (Capital Shopping Centres and Hammerson) suggesting that consumer acceptance of the Superdry brand in the UK remains strong. Investors need to focus on the vast international opportunity as the real share price driver over the medium term.

But Espirito Santo issued a sell note, saying:

Management warns that the group is operating in a difficult retail market which reflects macro environment and although the bulls will see this as an opportunity to reiterate confidence in the story, our argument remains that the 21% margin in 2011 is unsustainable given the likely investment in people and infrastructure required to support the impressive growth.

On a busy day for the high street, Dixons Retail rose 1.5%, up 0.16p to 10.75p, as first quarter like for like sales fell 7% but came in much as forecast by the City. The electrical retailer plans to cut an extra £10m of costs and reduce capital expenditure from up to £160m to £100m due to the difficult trading environment.

Elsewhere Sports Direct International added 7.7p to 217.7p and Thorntons rose 1p to 47p after their updates.